Oil near lowest level since June

Oil prices are trading sideways at just above five-month lows as concerns about oversupply come to the fore after OPEC+ pledges to extend and deepen output cuts failed to stem the tide. Global benchmark Brent traded around $76 a barrel after rising 2.7% in the previous two sessions, while U.S. crude traded above $71. Doubts that OPEC+ members will fully commit to the latest round of voluntary cuts, along with increased production from non-OPEC suppliers including the U.S., have raised fears of a widening glut. Time spreads continue to signal supply is outpacing demand, with Brent and U.S. crude futures curves trending lower through the middle of next year. The six-month spread on the Brent benchmark has been near a one-year low at contango of 18 cents a barrel. Just a month ago, it was $1.66 a barrel. Oil has fallen for the past seven weeks, its longest decline since 2018 and has fallen by nearly a fifth since late September. On demand, China’s consumption growth is expected to slow next year and a U.S. recession is on the cards. Citigroup said OPEC+ would need to extend output curbs through the entirety of next year to keep prices in the $70 to $80 range. “If OPEC+ continues with voluntary supply cuts and undermines the buildup in global oil inventories, oil prices are likely to find some fundamental support,” Vivek Dhar, an analyst at Commonwealth Bank of Australia, said. But “the trajectory of global oil demand also remains questionable.”